Energy-starved eastern India’s gas markets could get a big boost following Essar Exploration’s tie-up with Australia’s Galilee Energy to collaborate on coalbed methane projects in both countries.
The two companies have inked a non-binding memorandum of understanding to explore coalbed methane in Bengal’s Raniganj and Australia’s Galilee’s Glenaras gas project in Queensland that is on the cusp of commercialisation.
A top official of Essar said his company would be leveraging Galilee’s experience in providing technical and engineering assistance for Raniganj, located nearly 200 kms from Kolkata. For the records, Raniganj block currently has some 350 wells with contemporary development facilities, all indigenously designed and built.
“The company’s shale gas exploration will help Essar consolidate its position as one of the largest unconventional hydrocarbon players in the region,” Essar Oil and Gas Exploration and Production (EOGEPL) CEO and Director Pankaj Kalra said in an interview. Raniganj’s existing gas facility is capable of handling more than 2 million cubic metres per day of gas. It will eventually be increased to 3 million cubic metres per day. CBM output from its Raniganj East block in West Bengal has crossed 0.8 million standard cubic metres per day. Efforts are on to triple production in two and a half years by drilling an additional 200 wells.
The block holds 1.1 Tcf (trillion cubic feet) of in-place reserves. India’s eastern region is experiencing a significant rise in energy demand, while the existing conventional oil and gas reserves are unable to meet the growing needs. However, this region possesses one of the largest coal deposits as part of the Damodar Valley Basin, presenting a tremendous opportunity for CBM development.
India has an estimated CBM resource potential of around 2.6 trillion cubic metres spread across 12 states in 33 blocks. However, currently, there are only three producing blocks, with a combined production of less than 2 million metric standard cubic metres per day (mmscmd). The demand for gas in this area is projected to surpass approximately 15 million mmscmd in the near future.
The commissioning of state-owned Gas Authority of India’s Urja Ganga truck line has helped Essar, which was earlier handicapped by a lack of a pipeline to take the gas found below coal seams to users such as fertiliser plants. Essar’s investment of Rs 5500 crores has also helped the process, the company’s tie up with the Australian giant will bring cutting-edge technology that will help ramp up production. In the Indian Capital, officials of the Ministry of Petroleum and Natural Gas said New Delhi has been pushing for the production of CBM and other unconventional resources to supplement the availability of natural gas – the feedstock for power generation. CBM gas is also used to run fertiliser plants. The gas also is the basis for CNG for automobiles and piped cooking gas for households. New Delhi has plans to raise the share of this environmentally friendly fuel in its primary energy basket to 15 per cent by 2030 from the current 6.7 per cent.
The CBM gas is sold by Essar to GAIL at the formula linked to international Brent crude oil prices. Currently, the rate hovers around $12-12.2 per million British thermal units, or BTU.
Kalra said coalbed methane will address global environment concerns. “We need to think about switching and transitioning towards cleaner fuel sources. CBM emits 49 percent, 27 per cent and 15 percent less carbon than coal, diesel and propane respectively. By displacing these high emission fuels, the business strives to save emission significantly,” Kalra said. His company is currently operating ~350 wells in the block and has taken up a systematic approach of well revival through adaptation of world class technology to enhance gas production from the existing wells. The company is currently contributing 65 percent of India’s total CBM production. The company is further looking at investing another Rs 2,000 crore for drilling 200 more wells in the next 18 to 24 months.
Kalra said the Indian CBM market, being unconventional, faces certain challenges. “Unlike China and Australia, where CBM production has experienced significant growth due to the government’s proactive support, including setting CBM production targets in their five-year plans, providing subsidies to attract investors, facilitating infrastructure development, and subsidising R&D costs.There is a need for more assertive measures and greater inclusion to accelerate the development of this sector in India.”
India has the world’s fifth largest proven coal reserves. As a result, it holds high prospects for exploration and exploitation of CBM.
“CBM has the potential to displace 10-30 percent of this requirement in the near term and save on India’s LNG import bills by $2bn to the exchequer,” added Kalra.
This is not all. Essar’s interest in the Australian project – claim energy experts – is of tremendous significance. “Essar’s interest in Galilee’s Glenaras gas project may provide the final solution to transitioning the asset’s considerable contingent resources into production and the tightening Australian east coast gas market,” said Galilee’s chief executive, David Casey, was quoted by Upstream, the world’s topmost oil and gas news magazine.
A note by the Directorate of Hydrocarbons (DGH) said CBM blocks were carved out by DGH in close interaction with the Ministry of Coal (MoC) & Central Mine Planning and Design Institute (CMPDI), Ranchi. The Gondwana sediments of eastern India host the bulk of India’s coal reserves and all the current CBM producing blocks. The vast majority of the best prospective areas for CBM development are in eastern India, situated in Damodar Koel valley and Son valley.